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Montana health insurance marketplace: history and news of the state’s exchange

The state has received federal approval for a reinsurance program, resulting in an average premium decrease of 13% for 2020

Highlights and updates

Open enrollment for 2020 coverage in Montana has ended, although residents who experience qualifying events can still enroll or make plans changes for 2020. The next open enrollment period begins November 1, 2020, for plans effective in 2021.

Montana exchange overview

Montana uses the federally run exchange at HealthCare.gov, and three insurers offer plans for purchase.

Open enrollment for 2020 coverage in Montana has ended, although residents with qualifying events can still make changes to their coverage for 2020. The next enrollment window, for plans effective in 2021, will begin November 1, 2020.

Montana struggled with large double-digit rate increases for 2016 and 2017, and although subsidies offset the rate hikes for most enrollees, those who weren’t eligible for subsidies were paying considerably more for their health insurance by 2017.

But the rate hikes for 2016 and 2017 appear to have had a stabilizing impact, and the rate increase for 2018 would have been in the single digits if the Trump Administration had not eliminated federal funding for cost-sharing reductions (CSR).

And for 2020, average rates dropped by about 13 percent, thanks in large part to the state’s new reinsurance program. But benchmark premiums have dropped by an average of 14 percent, and premium subsidies — which are based on benchmark plan rates — are smaller than they were in 2019. So although average premiums are lower, that really only applies to people who pay full price for their coverage, which is about 13 percent of Montana’s exchange enrollees, in addition to everyone who buys ACA-compliant coverage outside the exchange.

The insurance companies that offered coverage in the state noted in 2017 that — contrary to the popular GOP talking point — the Montana market was not in a death spiral. All three of Montana’s exchange insurers have remained in the market ever since, and the new reinsurance program, effective in 2020, is adding to the market’s stability.

Montana receives federal approval to implement a reinsurance program as of 2020

Lawmakers in Montana passed HB652 in 2017, which called for the state to submit a 1332 waiver proposal to CMS, seeking permission to establish “a state reinsurance program, a high-risk health insurance pool, or any other program or combination of programs identified by the commissioner or the legislature.” Governor Steve Bullock vetoed the bill, however, noting that it was too broad and gave too much power to the Insurance Commissioner to make changes to Montana’s health insurance market without public input.

The Montana legislature only has regular sessions in odd-numbered years, so there were no new bills in 2018. But Governor Bullock and Department of Administration Director John Lewis established a 13-person working group in 2018, tasked with analyzing how a Montana-based reinsurance program could work to lower premiums by 10-20 percent in the state’s individual insurance market, and developing bipartisan legislation that could be presented to lawmakers during the 2019 session.

That legislation, S.B.125 (the Montana Reinsurance Association Act), was introduced by Senator Steve Fitzpatrick in January 2019, and was signed into law by Governor Bullock in May. The legislation called for the creation of a five-member board of directors for the reinsurance program, including representatives from each of the three insurers that currently offer individual market coverage in Montana (PacificSource, Montana Health CO-OP, and BCBS of Montana).

The legislation directs the reinsurance program to assess all major medical and disability insurers in the state (not including self-funded plans) a fee equal to 1.2 percent of their premium revenue from the previous year. The revenue generated by this assessment will be combined with federal pass-through funding that the state has secured via a 1332 waiver. [Pass-through funding refers to the fact that premiums will be lower with the reinsurance program, which means that premium subsidies will also be smaller. By using a 1332 waiver, Montana can receive federal permission to keep the savings that result from the smaller premium subsidies — instead of having the federal government keep that money — and use it to fund the reinsurance program.]

Reinsurance programs work by using the pool of state funds and federal pass-through funds to reimburse insurers for a portion of their high-cost claims. Insurance pools tend to have a fairly small number of very high-cost enrollees, and the claims for these individuals skew the total costs of the pool upward, resulting in higher premiums for everyone. By offsetting these very high-cost claims, the reinsurance program can stabilize the market and bring down premiums for the whole pool of insureds. In Montana, premiums were projected to be 10-20 percent lower with reinsurance than they would otherwise have been. Once rates were finalized for 2020, they ended up being about 13 percent lower than they were in 2019.

But this really only affects people who don’t get premium subsidies; for those who do get premium subsidies, their premium subsidies will shrink in line with the decreasing premiums, resulting in net premiums that are roughly the same (or possibly even a little higher — the average benchmark premium in Montana, on which subsidy amounts are based, dropped by 14 percent for 2020, while overall average premiums are decreasing by about 13 percent). In Montana, there are an estimated 15,000 people who buy their ACA-compliant health plans outside the exchange and thus do not receive premium subsidies. And nearly 7,000 people bought full-price plans in the Montana exchange for 2019 (another 38,000 people bought plans in the Montana exchange with the help of premium subsidies).

Montana’s reinsurance board was tasked with sorting out the specifics of how the program would operate, although the legislation gave them some guidelines (which are fairly similar to the specifications that other states have established for their reinsurance programs). The basic parameters and the board’s projected guidelines are as follows:

The reinsurance program will kick in once a claim reaches a certain dollar amount that can’t be less than $40,000 (for 2020, the board has adopted this $40,000 attachment point).

The reinsurance program will then reimburse the insurer for part of the claim; the reimbursed percentage will be set by the board, but must be between 50 percent and 80 percent (for 2020, the board has set the reimbursement rate at 60 percent).

The reinsurance program will continue to reimburse the insurer until the total claim reaches the reinsurance cap, which can’t be more than $1 million (for 2020, the board has set the cap at $101,750; these parameters are subject to change in future years).

For 2020, Montana expects the reinsurance program to cost $34.5 million. According to the 1332 waiver proposal that Montana submitted, the state expects federal pass-through funding to amount to $22 million in 2020 (with a range of $16.5 million to $25.8 million; CMS determines the actual number each year based on actual enrollment). The remainder of the funding will come from the state’s assessment on insurers. Montana expects individual market enrollment to increase modestly (about 1 percent per year) with the waiver in place, and expects premiums to be up to 9 percent lower than they would have been without the reinsurance program.

Average full-price premiums decreasing by 13%, thanks in large part to reinsurance

Insurers in Montana filed rate proposals for 2020 before the state’s reinsurance program was approved. Montana Health CO-OP and PacificSource both based their proposed 2020 premiums on the reinsurance program being approved, while Blue Cross Blue Shield of Montana did not incorporate the reinsurance program into their initial rate filings—but noted that they would refile rates if and when the reinsurance program was approved, and they did so later in the summer.

Montana Health CO-OP: 11.9 percent decrease. This was a revised filing, submitted in July 2019; the CO-OP had previously proposed an average rate decrease of 8 percent. Both filings were based on the assumption that the reinsurance program would be approved. (The CO-OP has about 20,700 members).

The state noted that about 65 percent of the total premium reduction could be attributed to the reinsurance program. So while premiums would likely have decreased even without the reinsurance program, the average decrease was much more significant thanks to the creation of the reinsurance program.

The overall average rate decrease is about 13.1 percent for 2020, but again, that applies to full-price plans. Nearly nine out of ten exchange enrollees receive premium subsidies, and those subsidies are smaller in 2020. The average benchmark plan premium is 14 percent lower for 2020, and subsidy amounts are based on the benchmark premiums. So some enrollees who receive premium subsidies could see higher after-subsidy premiums in 2020.

It’s noteworthy that Montana Health CO-OP — one of the four remaining ACA-created CO-OPs in the country — had taken over the top spot in terms of market share as of 2018 (in 2017, BCBSMT had more enrollees than the CO-OP).

For 2018, Montana insurers added the cost of cost-sharing reductions (CSR) to premiums — in most cases, to silver plan premiums, but there was some variation in how Blue Cross Blue Shield of Montana added the cost of CSR to their rates. But the Montana Insurance Commissioner’s Office clarified that for 2019, although the state left the CSR loading strategy up to the insurers, all three insurers added the cost of CSR to silver plan premiums.

The week before the rate proposals were filed by insurers, Montana Insurance Commissioner Matt Rosendale — a strong critic of the ACA — wrote a scathing op-ed about how rates were likely to keep going up in 2019, and reiterating Rosendale’s position that “Obamacare has made a mess of our health insurance and health care systems.” But after the rates were filed, the commissioner’s office noted that the proposed rate increases for 2019 were modest.

The average benchmark premium in Montana increased by 7 percent in 2019, which was similar to the overall average rate increase in the state. Premium subsidies are based on the cost of the benchmark plan in each area, so average subsidies grew to keep pace with premiums in 2019.

For perspective, here’s a look at how premiums have changed in previous years in Montana’s exchange:

In 2014, premiums were essentially an educated guess, as there was no claims experience on which to base rates. Across all carriers, the lowest cost bronze plan in the Montana exchange averaged $251/month in 2014, which was very close to the national average of $249.

For 2015, average rates only increased an average of 1.6 percent for individuals (when combined with small group premiums, the average increase was even smaller, at 1.35 percent). Insurance Commissioner Monica Lindeen described the 2015 rate hike as “historically low”

For 2016, average rate increases ranged from 22 percent to 34 percent. Then-Insurance Commissioner Monica Lindeen had an outside actuary review proposed rates, in an effort to get final rates as low as possible. But the Montana Insurance Commissioner’s office doesn’t have the authority to deny rate requests the way regulators in some states can.When plan selections for 2016 had been finalized, 83 percent of Montana exchange enrollees qualified for premium subsidies. Their average pre-subsidy premium is $421 per month, but their average after-subsidy premium is just $115 per month. That’s actually one dollar per month lower than the average after-subsidy rate in Montana’s exchange in 2015, when 84 percent of Montana enrollees received subsidies. That year, their average pre-subsidy premium was $346 per month, but after subsidies, they paid an average of $116 per month.

For 2017, the state published insurers’ proposed rate increases in July 2016, and on July 26, the three insurers participated in a public hearing about the proposed rates. They had additional rate proposal hearings in early August. All three carriers explained that their claims costs in 2015 far exceeded the premiums they collected, and that while there’s pressure on carriers to lower their rates, they cannot do so unless healthcare providers agree to reduced rates as well.Although the state reviewed the rates to determine whether they were justified, Montana regulators do not have the authority to prevent unjustified rate increases from being implemented; if a carrier chooses to implement a rate increase that the state has deemed unjustified, the state will issue a public notice stating that the rate increase is not justified (for a state to have an effective rate review program, that’s the bare minimum requirement).PacificSource’s average rate increase was 33.2 percent, and Mountain/Montana Health CO-OP’s average rate increase was 31 percent, both of which were determined to be justified by the Insurance Commissioner’s office. But Blue Cross Blue Shield of Montana initially submitted an average rate increase of 62 percent, and ultimately settled on an average increase of 55.3 percent. Monica Lindeen, Montana’s Insurance Commissioner in 2016, noted that the proposed rate increase for BCBSMT was the highest she had ever seen in the state, and possibly the highest that had ever been requested in Montana. Ultimately, her team found BCBSMT’s final rate proposal of 55.3 percent to be unjustified, but they did not have the authority to block the rate increase from taking effect.

For 2018, average rate increases ranged from 13.1 percent for PacificSource to 22.3 percent for Blue Cross Blue Shield of Montana. These rates included last-minute revisions to account for the loss of federal reimbursements for CSR. BCBSMT had the largest chunk of the market share in 2017, so the weighted average proposed rate increase was initially 14.14 percent (with BCBSMT including the cost of CSR in their 2018 premiums, but the other two insurers basing their rates on the assumption that federal CSR funding would continue). But the weighted average rate increase grew to 18.7 percent after the cost of CSR was added to Silver plans for Montana Health CO-OP and PacifiSource.

Enrollment in Montana’s exchange: 2014 to 2019

Open enrollment for 2019 health plans ran from November 1, 2018 to December 15, 2018. During that window, 45,374 people enrolled in plans through the Montana exchange. That was the third year in a row with declining enrollment, which has been the case in most states that use HealthCare.gov. The only year that enrollment in Montana’s exchange was lower than 2019’s was in 2014, when the exchange was brand new. Enrollment in 2019 was down about 22 percent from the exchange’s peak enrollment in 2016.

2014: The open enrollment period for 2014 coverage lasted for six months. During that window, 36,584 people enrolled in private plans through Montana’s exchange (another 4,638 people had qualified for Medicaid under pre-expansion guidelines; Medicaid expansion didn’t take effect in Montana until 2016).

2015: Total enrollment in private plans through the Montana exchange grew to 54,266 people.

2016: Enrollment grew again for 2016, when 58,114 people signed up during open enrollment.

2017: As was the case in the majority of the states that use HealthCare.gov, enrollment in Monana’s exchange dropped in 2017, when 52,473 people signed up during open enrollment.

One of the provisions of the ACA requires that carriers use a single risk pool for all of their individual plans in a state, so each carrier’s off-exchange enrollments are merged with its on-exchange enrollments for risk purposes — meaning that off-exchange enrollments are helpful in stabilizing rates. Inside the exchange, premium subsidies protect most consumers from the brunt of annual rate increases, but there is no such mechanism outside the exchange, and increasing prices over the years have made full-price plans less affordable, resulting in a sharp decrease in the number of people enrolled in full-price plans outside the exchange.

Insurer participation in Montana’s exchange

Insurer participation in Montana’s exchange has been remarkably stable since the exchange opened for business in 2014. There are three insurers that have offered plans statewide each year: Blue Cross Blue Shield of Montana (Health Care Service Corporation), PacificSource, and Montana/Mountain Health CO-OP (the state requires participating insurers to offer coverage statewide, but most states have seen fluctuation in terms of insurer participation in their markets and Montana has not).

In addition, Time joined the exchange in 2015, although their parent company, Assurant, subsequently announced that they would exit the insurance market nationwide at the end of 2015, and would no longer offer coverage in 2016. As of June 2015, there were 7,283 Montana residents who had individual coverage from Time; all of them had to select replacement policies for 2016.

Only a small fraction of the states did not lose any carriers in their exchanges in 2017, and Montana was among them. But although there were still three participating insurers in 2017, plans were only available for purchase from BCBSMT and PacificSource from December 22, 2016 until July 2017, due to an enrollment freeze for Montana Health CO-OP.

People who purchased Montana Health CO-OP plans before December 22, 2016 had coverage from the CO-OP throughout 2017. But the CO-OP limited their enrollment for 2017 (some carriers in other states did this too, including Medica in Minnesota and Kansas), and the following message began appearing in December 2016 when visitors arrived at their website:

“Montana Health CO-OP will accept no new enrollments for 2017 after the evening of December 22. We are halting new enrollments because of the large number of new members for 2017. Thank you to all our 10,000+ new members!”

From December 23 through the end of January 2017 (the remainder of open enrollment), enrollees in Montana were able to select from Blue Cross Blue Shield of Montana, and PacificSource. And that was also true for people signing up during special enrollment periods until July 2017.

But the enrollment freeze was lifted in July 2017 — ahead of schedule. Montana Health CO-OP had originally planned to start offering coverage as of November 2017 (ie, during open enrollment, for coverage effective January 2018). But as of mid-July, the CO-OP website said “MHC is now accepting special enrollments off exchange. On-exchange special enrollments to begin soon! (off exchange means plans purchased directly through the CO-OP, as opposed to via HealthCare.gov) A representative confirmed by phone that the CO-OP had recently received regulatory approval to begin selling plans again, and indicated that on-exchange plans would be available by late July, for effective dates starting in September. As is the case nationwide, enrollments outside of open enrollment are contingent upon having a qualifying event, but people with qualifying events could select Montana Health CO-OP plans with effective dates of September – December. And as of November 1, 2017, CO-OP plans became available during the regular open enrollment period for coverage effective January 1, 2018.

The enrollment freeze did not apply to small group plans, which are available year-round.

Insurance Commissioner Rosendale, who opposes the ACA, ran for U.S. Senate in 2018, but lost to incumbent Democrat Jon Tester

Montana’s Commissioner of Securities and Insurance, Republican Matt Rosendale, was elected in November 2016. Rosendale opposes the ACA and has long pushed for a more conservative, “free-market,” Montana-based approach to health care reform. Rosendale’s views are diametrically opposed to those of his predecessor, Commissioner Monica Lindeen (Lindeen was term-limited, and couldn’t run in 2016).

In a letter to U.S. Senator Lamar Alexander (R, Tennessee) in March 2017, Rosendale outlined his health care reform proposals, and noted that his letter superseded the letter that Lindeen had sent in late 2016. Rosendale wants more flexibility to allow plans that aren’t ACA-compliant to be sold. This is one of the basic tenants of the ACA repeal provisions that Congressional Republicans pushed throughout 2017, and is something that the Trump Administration has continued to address in proposed regulations; it’s essential to understand that allowing the sale of non-compliant plans would have a significant destabilizing effect on the insurance market and would drive up premiums for people with pre-existing conditions. Although Rosendale claims to support protections for people with pre-existing conditions, expanding access to non-ACA-compliant plans does exactly the opposite.

Rosendale also wants equalized tax treatment for individual and employer-sponsored plans, and access to health savings accounts (HSAs) for everyone, rather than just those with high deductible health plans. These are logical changes, but costly due to the reduced federal tax revenue. And HSAs are certainly not a panacea for all that ails our health care system, even if everyone had access to one (although there’s dispute about the degree to which patients can realistically act as “consumers” and shop for health care coverage, it’s also important to note that HSAs only help if you’re willing and able to fund them, which obviously wouldn’t be the case for everyone).

Although the insurance companies selling plans in Montana said that the markets were on a stable trajectory (unless GOP lawmakers were to sabotage them), in early 2017 Rosendale said “Obamacare is in a death spiral. Premiums have increased drastically, insurers are abandoning the marketplace, and the system is collapsing under its own weight.”

Despite Rosendale’s comments, Montana’s exchange has remained steady at three insurers, and an average rate increase of less than 6 percent in 2019. The state has not experienced insurers abandoning the marketplace — Montana is one of the few states where there were no insurer exits at the end of 2016 or 2017, despite insurers in many other states opting to exit the exchanges.

CSR funding and Montana’s 2018 health insurance rates

Blue Cross Blue Shield of Montana’s initial proposed rate increase for 2018 was significantly larger than the other two insurers. But part of that had to do with how the insurers initially handled the uncertainty surrounding federal funding for cost-sharing reductions (CSR). Throughout 2017, President Trump threatened to cut off funding for CSR. Montana’s Insurance Commissioner didn’t tell insurers to take a specific approach to CSR funding, so it was left to the insurers to price their rates as they saw fit.

Montana Health CO-OP and PacificSource both filed rates that were based on the assumption that CSR funding would continue in 2018. Blue Cross Blue Shield of Montana took the opposite approach, and based their rate proposal on the assumption that CSR funding would not continue.

But on October 12, 2017, the Trump Administration announced that federal funding for CSR would end immediately, leaving Montana Health CO-OP and PacificSource in a tough spot — one that the CO-OP described as “untenable” and “not survivable” unless they were allowed to refile new rates with the cost of CSR included. The CO-OP indicated that they would have to exit the exchange if they weren’t allowed to file new rates, and at first, it appeared that might be the case.

CMS had opened up a short window after the CSR defunding announcement, to allow insurers to refile new rates if they were in states where regulators had not allowed them to file initial rates based on the assumption that CSR funding would end. But since Montana regulators had not told the insurers how to file (and BCBSMT had already filed rates with the assumption that CSR funding would end), CMS initially told the Montana Department of Insurance that Montana insurers would not be eligible to refile rates.

But on October 16, CMS reversed that decision and notified the Montana Department of Insurance that Montana Health CO-OP and PacifiSource would be allowed to refile their rates for 2018. Montana Health CO-OP added 24 percent to their Silver plan rates, and PacificSource added 11 percent to their Silver plan rates. At other metal levels, the previously filed rates remained unchanged for both insurers, but the higher premiums for silver plans resulted in average rate increases of 16.6 percent for Montana Health CO-OP and 13.1 percent for PacificSource, instead of the single-digit rate hikes they had initially filed.

Adding the cost of CSR to Silver plan rates is the strategy that protects most consumers, since premium subsidies in 2018 are larger as a result of the spike in Silver plan rates. Those subsidies can be applied to bronze or gold plans, making them a relatively better value. And for people who don’t qualify for subsidies, bronze and gold plans continue to be available without the added cost of CSR.

In Montana, 85 percent of exchange enrollees qualified for premium subsidies in 2017, and that grew to 87 percent in 2018. And average subsidies were more than twice as large in 2018 (the average enrollee who gets a premium subsidy in Montana was receiving $637 per month in 2018, as opposed to $304 per month in 2017; to clarify, the subsidy is sent to the insurance company on the enrollee’s behalf — it’s not sent directly to the enrollee). The larger subsidies are a result of the much higher silver plan rates, as subsidy amounts are based on the cost of the benchmark plan (second-lowest-cost silver plan in each area).

Exchange history in Montana

Montana’s legislature not only failed to authorize a state-run exchange, it also passed a bill in 2011 to prohibit the creation of an insurance exchange in Montana.

While Democratic Gov. Brian Schweitzer vetoed that bill, neither he nor Monica Lindeen, who was then serving as the state auditor and insurance commissioner, were able to generate legislative or public support for an exchange. So Montana residents use the federally-run HealthCare.gov as their exchange.

Under the federal model, most aspects of the exchange are managed by the federal government. However, states can retain control of “plan management” functions, and Montana opted to do so. Lindeen’s office released final exchange rates for the first round of open enrollment in mid-August 2013, nothing that the premiums were similar to what they would have been without the ACA. The Insurance Commissioner’s office regulates plans that operate on the exchange, as it does for plans sold outside the exchange.

Grandmothered plans

On November 25, 2013 Lindeen announced that Montana would allow health insurance carriers to extend 2013 policies that had been scheduled to terminate at the end of the year, but it was left up to each carrier to decide how to proceed. Insureds with a policy that was eligible for renewal into 2014 also had the option of switching to an exchange plan.

Ultimately, none of the insurance carriers in Montana’s individual market opted to keep transitional plans in place, and all non-grandfathered plans in the individual market in Montana are now ACA-compliant.